Hello and welcome to CantosCharts Masterclass. I'm Sandy Jadeja, Chief Market Strategist for CMS FX. Welcome to another lesson in technical analysis. As always, this is simply for information and educational purposes only.

In today's lesson, we're going to be taking a look at how to trade at the end of the month with an edge.

So, for example, what we really want to do is to observe price action toward the end of the month, and price should always be in a declining phase, because we're actually looking at trading the rallies, which tend to occur towards the end of the month.

We're going to look for a setup, which we really need to be patient for, and then we're going to be obviously using stops to protect ourselves.

Now, take a look at this chart over here, and you'll see that I've highlighted some boxes. And within the boxes, we see blue and red arrows, and the blue arrows indicate where we've taken long positions and the red arrows indicate where we've actually exited the market.

Now, you'll notice that in the first blue box, the market had rallied but it still gave us an opportunity to take a long position.

In this second box over here, the market was in a declining phase for a short term, but we still managed to capture a nice points move during that phase.

Followed by the third box - again we see an overall rally, the market's in a bullish phase, but here too we've managed to capture some points out of that move there. And of course towards the end, we managed to capture a section there as well.

So what exactly am I looking for when I'm participating in these end-of-month short-term rallies?

We'll take a look at this slide over here, and essentially what I'm doing is I'm waiting towards the end of the month for the markets to fall back. Now, in that falling back, I'm looking for a positive day.

So here, we can see the market's rallied, and then right towards the end of the month, we had a few negative days' close, and right at the very end we had a positive close. And that's my real key setup. That's the trigger.

So there are two ways of trading this. Either you can trade on the close or you can trade on the breakout on the following day above the higher of that price bar. That would actually be a safe re-entry.

Now, here we have a positive close and all I'm doing is I'm going to take a long position and exit on the second day of the next month. So as you can see, we had a nice short-term rally there.

Again, on the second example, the market traded higher, came down a little bit, and then we had a positive close followed by an exit on the second day.

So as you can see, this is a very, very, very simple technique and tends to generate fairly good results. And that's not to say it's going to work all of the time, but at least we have a possible trading edge here and we can utilise this in conjunction with other technical analysis methods.

So how does this actually perform? Well, if we take a look at the results - and these are some recent results. In January this would have yielded 110 points' gain. In February that would have yielded a 95-point gain, in March 100 points and in April 100 points. So that's a total of 405 points.

Now, compare that to if you'd have gone long on December the 31st, up until the end of April. So we had a closing price of 5412 in December and at the end of April, we were looking at 5600. So that's a net result of 212 points. So that's just over 100 per cent gain by taking this method versus the original buy-and-hold method.

So clearly there's an edge to trading just a few days of the month rather than doing a buy-and-hold method.

Now, of course, there are times when the markets will not work. Going in toward the end of the April period and looking towards the May buying position, here's what we saw.

The market had declined for a few days, and then the market had given us a buy signal by closing to the upside. If we would have taken that buy position and placed our stop just below the low of that day, we would have been stopped out for a 37-points' loss. And of course, we would have missed this whole move on the down side, which would have protected our capital. So stops are actually quite important as always especially in this particular method here.

So if we tend to watch the market toward the end of the month for a short-term rally, and if the market's declining, wait for a positive close to initiate the buy position, and always use stop-loss orders to protect capital.

In the next method, we're going to be taking a look at short-term swing trading. In the meantime, have a great trading week. I'm Sandy Jadeja.